Business Directories

Sharia instruments vital for GCC project finance

Manama, May 17, 2011

Sharia-compliant financial instruments will play an increasingly important role in project finance across the region, said Charles Russell ME partner Nicholas Polley at the seminar hosted by the law firm in Bahrain.

'Across the GCC, all major projects now have a significant involvement from Sharia-compliant investments,' remarked Polley at the event held in the InterContinental Regency Hotel on Monday.

'With the growth of the Islamic finance market in recent years, experience has shown that major projects can be commercially financed either fully from Islamic finance or by means of both conventional and Islamic finance arrangements,' he noted.

According to Polley, Islamic finance in project finance has been growing hugely over the past seven years.

'There are two reasons for this. Firstly, Sharia-compliant structures are being more widely recognised and secondly Islamic banking across the region can now operate at very competitive rates for key projects,' he explained.

He pointed out that globally energy and infrastructure projects will need some $10 trillion between now and 2030. 'The world's energy needs would be 25 per cent higher by 2015 and nearly 50 per cent higher in 2030.'

'The growth in Islamic finance demand has led to the development of Sharia-compliant structures for project financing, construction projects and asset financing,' he added.

'For a project which has already been completed and is then going to be financed by a purchaser, an ijara leasing arrangement may be used. For a project or asset which is to be constructed or manufactured the istisna would be the correct Sharia model,' Polley said.

The seminar was the second run by Charles Russell in Bahrain this year and the firm's Middle East head Clive Hopewell said he saw this latest event as being part of their effort to support the 'Bahrain Back to Business' movement.-TradeArabia News Service